Rule Changes On Retiree Benefits
Retiree advocates gave a mixed reaction to a new regulation allowing employers to provide more limited health care benefits for retirees who are 65 and older, though some critics called the change tantamount to discrimination.
The regulation from the Equal Employment Opportunity Commission (EEOC) makes clear that employers can spend more on retirees under 65 than those over 65 without breaking age discrimination laws, so they can cut or reduce benefits for retirees when they become eligible for Medicare.
That could mean more expansive benefits for retirees under 65 than those who are over 65, says the AARP, a membership organization that represents older Americans.
“The EEOC moved toward legitimizing discrimination based on age,” says spokesman Drew Nannis. “This is a civil rights issue.”
But the EEOC says the policy change, announced Wednesday, is aimed at protecting retiree benefits. The EEOC proposed the rule in response to a 2000 U.S. Court of Appeals decision that required that the health insurance benefits received by Medicare-eligible retirees be the same, or cost the employer the same, as the benefits received by younger retirees.
After that decision, labor unions and employers told the EEOC that complying with the decision would force companies to cut or eliminate retiree health benefits — potentially leaving millions of retirees age 55 and older with less health insurance or none at all, the EEOC says.
Even some organizations who say the change will hurt some older retirees agree there is a major benefit: “Some employers are likely to retain health benefits for workers under age 65,” says Robert Hayes, president of the New York-based Medicare Rights Center, a national consumer service organization.
More than 10 million retirees rely on employer-sponsored health plans as a primary source of coverage or as a supplement to Medicare, according to the EEOC.
But the percentage of employers offering health coverage to those who retire before Medicare kicks in has dropped from an average of 21.6 percent of private-sector employers in 1997 to about 12.7 percent in 2005, according to the Employee Benefit Research Institute.
The cutbacks have been coming because federal law does not require employers to provide health benefits to either active or retired workers.
The EEOC says supporters of the new rules include the Society for Human Resource Management, the AFL-CIO, the American Federation of Teachers, the National Education Association and the American Benefits Council.
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